Identify and record
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At the beginning of 2006, D & L Enterprises had the following balances in its accounts:
Cash ---> $8,400
Inventory 2,000
Common Stock 8,000
Retained Earnings 2,400
During 2006, D & L Enterprises experienced the following events:
1. Purchased inventory costing $5,600 on account from Smoot Company under terms 2/10, n/30. The merchandise was delivered FOB shipping point. Freight costs of $500 were paid in cash.
2. Returned $400 of the inventory that it had purchased because the inventory was damaged in transit. The freight company agreed to pay the return freight costs.
3. Paid the amount due on its account payable to Smoot Company within the cash discount period.
4. Sold inventory that had cost $6,000 for $9,000. The sale was on account under terms 2/10,n/45.
5. Received returned merchandise from a customer. The merchandise had originally cost $520 and had been sold to the customer for $840 cash. The customer was paid cash for the returned merchandise.
6. Delivered goods in Event 4 FOB destination. Freight costs of $600 were paid in cash.
7. Collected the amount due on accounts receivable within the discount period.
8. Took a physical count indicating that $1,800 of inventory was on hand at the end of the accounting period.
Required.
A. Identify each of these events as asset source (AS), asset use (AU), asset exchange (AE), or claims exchange (CE). Also explain how each event affects the financial statements by placing a + for increase, - for decrease, or NA for not affected under each of the components in the following statements model. Assume that the perpetual inventory method is used. when an event has more than one part, use letters to distinguish the effects of each part. The first event is recorded as an example.
Event Event Stk. Cash
No. Type Assets = Lia + Equity Rev. - Exp. = Net Inc. Flow
1a AS + + NA NA NA NA NA
1B AE +- NA NA NA NA NA -OA
B. Record the events in general journal format.
Please help.
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Solution Summary
The solution explains how to identify the transaction type and record in the journal entry
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